Annual report pursuant to Section 13 and 15(d)

Note 13 - Capital and Other Components of Equity

v3.20.2
Note 13 - Capital and Other Components of Equity
12 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Stockholders' Equity Note Disclosure [Text Block]
13.
Capital and other components of equity
 
(a) Common Shares:
 
Authorized capital stock:
 
Unlimited number of shares:
 
Ø
Class A shares (Common Shares), voting (
one
vote per share), participating and without par value
 
Ø
Class B shares, voting (
ten
votes per share), non-participating, without par value and maximum annual non-cumulative dividend of
5%
on the amount paid per share. Class B shares are convertible, at the holder’s discretion, into Class A shares (Common Shares), on a
one
-for-
one
basis, and Class B shares are redeemable at the holder’s discretion for CAD
$0.80
per share, subject to certain conditions. There are
none
issued and outstanding.
 
Ø
Class C shares, non-voting, non-participating, without par value and maximum annual non-cumulative dividend of
5%
on the amount paid per share. Class C shares are convertible, at the holder’s discretion, into Class A shares (Common Shares), on a
one
-for-
one
basis, and Class C shares are redeemable at the holder’s discretion for CAD
$0.20
per share, subject to certain conditions. There are
none
issued and outstanding.
 
Ø
Class D and E shares, they are non-voting, non-participating, without par value and maximum monthly non-cumulative dividend between
0.5%
and
2%
on the amount paid per share. Class D and E shares are convertible, at the holder’s discretion, into Class A shares (Common Shares), on a
one
-for-
one
basis, and Class D and E shares are redeemable at the holder’s discretion, subject to certain conditions. There are
none
issued and outstanding.
 
(b) “At-the-market” sales agreement
 
On
February 14, 2019,
the Corporation entered into an “at-the-market” (
ATM
) sales agreement with B. Riley FBR, Inc. (“
B. Riley”
) pursuant to which the Common Shares
may
be sold from time to time for aggregate gross proceeds of up to
$30
million, with sales only being made on the NASDAQ Stock Market. The Common Shares would be issued at market prices prevailing at the time of the sale and, as a result, prices
may
vary between purchasers and during the period of distribution. The ATM has a
3
-year term and requires the Corporation to pay between
3%
and
4%
commission to B. Riley based on volume of sales made.
 
As at
March 31, 2020,
the Corporation sold a total of
4,065,986
Common Shares (
none
as at
March 31, 2019)
through the ATM program over the NASDAQ Stock Market, for net proceeds of
$7
million (net of commissions paid for approximately
$291
). The shares were sold at the prevailing market prices which resulted in an average price of approximately
$1.79
per share. In addition, a total of
$40
of expenses originally recorded as deferred financing costs were reclassified to equity.
 
 
(c) Public Offerings –
October 2018:
 
On
October 9, 2018,
the Corporation closed a U.S. public offering of
16,600,000
Common Shares at a price of
$1.00
per share. In addition, the underwriters fully exercised their over-allotment option to purchase
2,490,000
additional Common Shares at the same public offering price. This offering generated gross proceeds of
$19.1
million (CAD
$24.7
million), which resulted in net proceeds to the Corporation of
$17.4
million (CAD
$22.6
million) and a total of
19,090,000
Common Shares issued.
 
On
October 23, 2018,
the Corporation closed a Canadian public offering of
18,750,000
Common Shares at a price of CAD
$1.28
per share. In addition, the underwriters fully exercised their over-allotment option to purchase
2,812,500
additional Common Shares at the same public offering price. This offering generated gross proceeds of
$21.1
million (CAD
$27.6
million), which resulted in net proceeds to the Corporation of approximately
$19.4
million (CAD
$25.4
million) and a total of
21,562,500
Common Shares issued.
 
13.
Capital and other components of equity (continued):
 
(d) Public Offering –
May 2018:
 
On
May 9, 2018,
the Corporation closed a Canadian public offering issuing
9,530,000
units at a price of CAD
$1.05
per unit for gross proceeds of
$7.8
million (
CAD$10
million). The units issued consist of
9,530,000
Common Shares and
9,530,000
warrants. Each warrant entitles the holder thereof to acquire
one
Common Share at an exercise price of CAD
$1.31
at any time until
May 9, 2023.
 
On
May 14, 2018,
the underwriters exercised their over-allotment option by purchasing an additional
1,429,500
units at a price of CAD
$1.05
per unit, for additional gross proceeds of
$1.1
million (CAD
$1.5
million). The units issued consist of
1,429,500
Common Shares and
1,429,500
warrants. Each Warrant entitles the holder thereof to acquire
one
Common Share of the Corporation at an exercise price of CAD
$1.31
at any time until
May 9, 2023.
 
At the time of issuance, the warrant component of these units are derivative warrant liabilities for accounting purposes due to certain contingent provisions that allow for cash settlement in the warrant agreement (see note
13
). The proceeds of the offering are required to be split between the derivative warrant liabilities and the equity-classified Common shares at the time of issuance of the units. The fair value of the derivative warrant liabilities at the time of issuance was determined to be
$3.3
million (CAD
$4.3
million) and the residual of the proceeds of
$4.8
million (CAD
$6.2
million) were allocated to the Common Shares. Issuance costs related to this transaction totaled approximately
$1.4
million (CAD
$1.8
million) and have been allocated between the derivative warrant liabilities and Common shares based on relative value. Resulting from this allocation,
$0.5
million (CAD
$0.7
million) has been allocated to the derivative warrant liabilities and is recognized in finance expenses in the Statements of Loss and Comprehensive Loss, whereas the remaining portion of
$0.9
million (CAD
$1.1
million) in issuance costs was allocated to the Common Shares and recognized as a reduction to Common Shares, in the Balance Sheet.
 
The fair value of the public offering warrants at issuance was estimated using to the Black-Scholes option pricing model and was based on the following weighted average assumptions:
 
    May 2018
CAD
 
Exercise price   $
1.31
 
Share price   $
0.82
 
Risk-free interest    
2.21
%
Contractual life (years)    
5
 
Expected volatility    
87.40
%
 
The weighted average fair value of the public offering warrants issued in
May 2018
was determined to be
$0.30
(CAD
$0.39
) per warrant. Changes in the subsequent measurement of fair value of the warrants are recognized in financial expenses.
 
As part of the transaction, the Corporation also issued broker warrants to purchase up to
547,975
Common Shares. Each broker warrant entitles the holder thereof to acquire
one
Common Share at an exercise price of CAD
$1.05
,
at any time until
May 9, 2023.
The broker warrants are considered to be equity-classified non-employee stock-based awards and are thus accounted for at fair value at grant date and
not
subsequently revalued. To determine the fair value of these broker warrants, a Black-Scholes options pricing model was used based on the following assumptions:
 
    May 2018
CAD
 
Exercise price   $
1.05
 
Share price   $
0.81
 
Risk-free interest    
2.20
 
Contractual life (years)    
5
 
Expected volatility    
87.40
%
 
The total value associated with the broker warrants amounted to
$220
(CAD
$283
) and was recorded in additional paid in capital.
 
13.
Capital and Other Components of Equity (continued):
 
(e) Public offering –
December 27, 2017
 
On
December 27, 2017,
the Corporation closed a U.S. public offering of
9,900,990
units at a price of
US$1.01
per unit for gross proceeds of
$10
million. The units issued consist of
9,900,990
Common Shares and
8,910,891
warrants to purchase
one
Common Share. As part of this closing, the underwriters also partially exercised for
nil
consideration the over-allotment option for warrants, which were issued for a right to purchase
892,044
Common Shares at an exercise price of
$1.26.
 
The warrants forming part of the units are derivative warrant liabilities for accounting purposes due to the currency of the exercise price being different from the Corporation’s functional currency. The proceeds of the offering are required to be split between the derivative warrant liabilities and the equity-classified Common Share at the time of issuance of the units. The fair value of the derivative warrant liabilities at the time of issuance was determined to be
$4.7
million and the residual of the proceeds was allocated to the Common Shares. Total issuance costs related to this transaction totaled
$2
million. The issuance costs have been allocated between the warrants and Common Shares based on relative value. The portion allocated to the warrants was recognized in financial expenses in the Statements of Loss and Comprehensive Loss, whereas the portion allocated to Common Shares was recognized as a reduction to Common Shares in the Balance Sheet.
 
At the time of issuance, the fair value of the warrants at issuance was estimated according to the Black-Scholes option pricing model and based on the following assumptions:
 
    December 27,
2017
 
Exercise price   $
1.26
 
Share price   $
0.97
 
Risk-free interest    
2.22
%
Contractual life (years)    
5
 
Expected volatility    
93.52
%
 
The fair value of the warrants issued was determined to be
$0.47
per warrant as at
December 27, 2017.
Changes in the fair value of the warrants are recognized in financial expenses.
 
As part of the transaction, the Corporation also issued broker warrants to purchase up to
495,050
Common Shares. Each broker warrant entitles the holder thereof to acquire
one
Common Share at an exercise price of
$1.2625,
at any time until
December 19, 2022.
The broker warrants were considered derivative warrant liabilities at the time of the issuance, due to the currency of the exercise price being different from the Corporation’s functional currency. The fair value of the derivative warrant liabilities at the time of issuance was determined to be
$321,
(CAD
$406
) which was estimated according to the Black-Scholes option pricing model and based on the same assumptions as those used to value the warrants forming part of the units. Upon adoption of FASB Accounting Standards Update
No.
2018
-
07,
Improvements to Nonemployee Share-Based Payment Accounting on
April 1, 2018,
the broker warrants became equity-classified and the fair value as determined on
April 1, 2018,
was reclassified from derivative warrant liability to additional paid-in capital in the amount of
$
65
.
This amount is
not
subsequently remeasured. To determine the fair value of the broker warrants, a Black-Scholes option pricing model was used based on the following assumptions at the transition date to ASU
No.
2018
-
07:
 
    April 1,
2018
 
Exercise price   $
1.2625
 
Share price   $
1.02
 
Risk-free interest    
2.56
%
Remaining Contractual life (years)    
4.75
 
Expected volatility    
95.16
%
 
13.
Capital and Other Components of Equity (continued):
 
(f) Public offering -
February 21, 2017:
 
Concurrently with the private placement described in Note
12,
on
February 21, 2017,
the Corporation closed a public offering of
3,930,518
units at a price of CAD
$1.45
per unit for gross proceeds of
$4,337
(CAD
$5,699
). Each unit consists of
one
Common Share and
one
half of
one
Common Share purchase warrant. Each whole warrant entitles the holder thereof to purchase
one
Common Share at an exercise price of CAD
$2.15
per share, at any time until
February 21, 2022.
The transaction costs associated with the public offering amounted to
$906
(CAD
$1,190
) and were allocated between Common Shares and additional paid-in capital.
 
As part of the transaction, the Corporation also issued broker warrants to purchase up to
234,992
Common Shares at an exercise price of CAD
$2.15
per share. The total costs associated with the broker warrants amounted to
$110
(CAD
$144
) and were allocated to additional paid-in capital (and reclassified to Common Shares upon exercise subsequent exercise of warrants).
 
The warrants issued as part of the units and the broker warrants include an “Acceleration Right”, related to the Corporation’s right to accelerate the expiry date of the warrants. The Acceleration Right clause means the right of the Corporation to accelerate the expiry date to a date that is
not
less than
30
days following delivery of the acceleration notice if, at any time at least
four
months after the effective date, the volume-weighted average trading price of the Common Shares equals or exceeds CAD
$2.65
for a period of
20
consecutive trading days on the TSXV.
 
(g) Issuance of shares:
 
The following table summarizes the shares issued to settle the payment of accrued interest on the unsecured convertible debentures with the corresponding amount recorded to Common Shares. Subsequent to
September 30, 2018
to the settlement of the debentures, all scheduled interest payments were paid in cash.
 
 
Accrued interest as at
 
Share issuance date
 
Number of shares
Amount
CAD $
       
March 31, 2017
April 7, 2017
9,496
17
June 30, 2017
August 15, 2017
23,885
40
September 30, 2017
December 27, 2017
22,783
40
December 31, 2017
March 27, 2018
33,605
40
March 31, 2018
June 6, 2018
30,348
40
June 30, 2018
August 21, 2018
51,807
40
September 30, 2018
October 31, 2018
23,723
40
 
 
195,647
257
 
 
 
13.
Capital and other components of equity (continued):
 
(h) Warrants:
 
The warrants of the Corporation are composed of the following:
 
    March 31, 2020     March 31, 2019  
    Number
outstanding
   
 
Amount
    Number
outstanding
   
 
Amount
 
          $           $  
Liability                                
May 2018 public offering warrants 2018 (i)    
6,593,750
     
1,146
     
10,188,100
     
6,178
 
Series December 2017 U.S. public offering warrants 2017 (ii)    
7,072,962
     
1,247
     
9,801,861
     
6,005
 
     
13,666,712
     
2,393
     
19,989,961
     
12, 183
 
Equity                                
Public offering warrants                                
Public offering broker warrants May 2018 (iii)    
222,976
     
89
     
547,975
     
219
 
Public offering U.S. broker warrants December 2017 (iv)    
259,121
     
161
     
495,050
     
308
 
Public offering warrants February 2017 (v)    
1,723,934
     
631
     
1,904,034
     
697
 
Private Placement- contingent warrants                                
2017 unsecured convertible debenture conversion option and contingent warrants (vi)    
-
     
-
     
1,052,630
     
235
 
     
2,206,031
     
881
     
3,999,689
     
1,459
 
 
(i)
Warrant to acquire
one
Common Share at an exercise price of CAD
$1.31,
expiring on
May 9, 2023.
(ii)
Warrant to acquire
one
Common Share at an exercise price of
$1.26,
expiring on
December 27, 2022.
(iii)
Warrant to acquire
one
Common Share o at an exercise price of CAD
$1.05,
expiring on
May 9, 2023.
(iv)
Warrant to acquire
one
Common Share at an exercise price of
$1.2625,
expiring on
December 19, 2022.
(v)
Warrant to acquire
one
Common Share at an exercise price of CAD
$2.15,
expiring on
February 21, 2022.
(vi)
Warrant to acquire
one
Common Share at an exercise price of CAD
$1.90,
expiring on
February 21, 2020,
exercisable only for any portion of or all debentures paid by the Corporation prior to maturity. During the year ended
March 31, 2020,
convertible debentures were fully repaid with an amount of CAD
$2
million resulting in the cancellation of the outstanding conversion option.
 
Warrants exercised: During the year ending
March 31, 2020,
the following warrants were exercised with the resulting cash proceeds:
 
   
Number
exercised
   
Proceeds
$
 
May 2018 over-allotment Warrants 2018    
3,594,350
     
3,567
 
Series December 2017 US Public offering Warrants 2017    
2,676,611
     
3,373
 
Public offering warrants February 2017    
180,100
     
292
 
Public offering Broker warrants May 2018    
325,000
     
257
 
Contingent warrants private placement 2017    
150,000
     
217
 
     
6,926,061
     
7,706
 
 
 
13.
Capital and other components of equity (continued):
 
(h) Warrants (continued):
 
During the year ended
March 31, 2020,
235,929
broker warrants and
52,288
derivative warrants offered as part of the
December 2017
U.S. public offering were exercised on a cashless basis to acquire
136,013
Common Shares.
 
During the year ended
March 31, 2019,
771,400
warrants offered as part of the
May 2018
public offering were exercised at an exercise price of
$1.31
per Common Share of the Company, resulting in
$0.78
million of cash proceeds. In addition,
4,455
warrants offered as part of the
December 2017
U.S. public offering were exercised in a cashless manner to acquire
1,074
Common Shares of the Company.  A total of
772,474
Common Shares were issued as a result of
775,855
warrants being exercised.